Cosmetics giant Estee Lauder warns on slowing Australian market

Cost of living pressures have put a handbrake on growth as consumers rein in their spending on skincare, perfume and lipstick.

Estee Lauder sees slowing growth in Australia for cosmetics, beauty and fragrance products.

Cost of living pressures have put a handbrake on growth for the beauty, cosmetics and skincare markets in Australia, warns leading cosmetics house Estee Lauder.

While fragrance, beauty and skincare houses like the New York-based Estee Lauder enjoyed a tailwind of strong sales coming out of Covid-19 lockdowns in 2022 and 2023 which accelerated growth, this growth now seems to have stalled as consumers rein in spending on perfumes, lipstick and skin cream.

After Estee Lauder in Australia reported a strong 17.3 per cent sales leap for fiscal 2023 as shoppers returned to retailers, the New York beauty giant posted a 1 per cent sales retreat in 2024 to $317.15m.

The global cosmetics and make-up brand last week shocked investors with lower-than-expected earnings in its first quarter and a cut to its dividend, sending its shares down more than 20 per cent.

It called out Asia as a source of the weakness, especially China and an overall weaker consumer struggling with cost of living pressures, with its global skin care sales down 7 per cent, make-up down 2 per cent and haircare sales down 6 per cent.

In Australia Estee Lauder is witnessing a similarly stretched consumer pulling back on products.

“Given ongoing cost of living challenges, which continue to impact consumer spending, the total Australian prestige beauty market has seen modest growth in 2024,” the retailer says in its latest accounts lodged with the corporate regulator.

However, Estee Lauder believes it has retained its market position as the leader in the local prestige beauty market with its Australian sales growth driven by the performance of its fragrance category.

“Additionally skincare performance over-indexed the total market, and online sales delivered year-on-year growth.”

According to financial results lodged with ASIC, Estee Lauder’s profit in Australia dropped to $26.8m in 2024 from $43.715m in 2023. A new head office saw some cost increases for the year.

Department store Myer, which stocks an extensive range of Estee Lauder products, has highlighted the beauty and cosmetics category as a major source of revenue growth going forward as its new executive chair Olivia Wirth argues Myer needs to do better in the category.